UK's TPR DB funding code consultation receives 'general support' despite fast track concerns

The Pensions Regulator (TPR) in the UK said it received “general support” in its interim response to its first defined benefit (DB) funding code consultation, although some concerns have been raised about proposed twin track routes.

As reported by our sister publication, Pensions Age, the consultation aimed to scope out what the revised DB funding code may look like under the new developing legislation, asking for views on proposals such as TPR’s proposed regulatory approach of implementing twin track routes to demonstrating compliance, the principles that should underpin all valuations in the revised framework and ideas on how these principles could be applied in practice.

The regulator stated that there were 127 responses to the consultation across a broad range of stakeholders, generating 6,000 comments in total, and noted that there was general support for the principles and regulatory approach proposed in the consultation.

It did however acknowledge that some respondents raised concerns about how the principles would be applied in practice through the proposed twin-track regime.

Most prominent of the concerns were the risks associated with where fast track guidelines would be set, proposed fast track guidelines for open schemes, a potential loss of flexibility, an increased evidential burden for schemes taking the bespoke route, the bespoke route being perceived as “second best” and reliance on covenant being watered down.

TPR executive director of policy, David Fairs, commented: “Our first consultation was complex, and we are grateful for the well thought-out responses. We are now working through the issues raised from more than 6,000 comments received. We will be developing our fast track guidelines while taking into account the very challenging current economic conditions, and we will carefully assess any potential impacts.

“Our revised code of practice has to be consistent with new legislation, so we will have to wait for the passage of the Pension Schemes Bill through Parliament and the Department for Work and Pensions’ consultation on draft regulations, currently expected to be in the first part of this year. We therefore anticipate publishing our second consultation in the second half of 2021.”

The regulator said its second DB funding code consultation in the second half of the year would include a full summary of the responses to its first consultation and the approach taken in light of these responses and the final legislative package, the draft code of practice for consultation and our proposed regulatory approach, and an impact assessment and supporting analysis.

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